Supply and demand shifts from rival advertising and wage increase

Steps:

• Rival's successful advertising reduces demand for clothing in this market, shifting demand curve left.
• Higher workers' wages increase production costs, shifting supply curve left.
• Leftward demand shift decreases equilibrium quantity and price.
• Leftward supply shift decreases equilibrium quantity and increases price.
• Combined: quantity falls definitively; price rises if supply shift dominates (as in diagram for option A).

Why A is correct:

• A shows new equilibrium at lower quantity and higher price, matching leftward shifts where supply effect outweighs demand per standard supply-demand model.

Why the others are wrong:

• B: Wrong, as it shows higher quantity, ignoring both leftward shifts.
• C: Wrong, as it shows lower price, underestimating supply shift's upward pressure.
• D: Wrong, as it shows no quantity change, contradicting decreased demand and supply.

Final answer: A